In the darkest days of our current financial crisis (which seems to be entering its second act in Europe), no country suffered a more spectacular collapse than tiny Iceland with its 300,000 citizens:

"In 2003, Iceland's three biggest banks had assets of only a few billion dollars, about 100 percent of the country's gross domestic product. Over the next three and a half years the banking assets grew to over $140 billion and were so much greater than Iceland's GDP that it made no sense to calculate the percentage of it they accounted for. It was, as one economist put it to me, 'the most rapid expansion of a banking system in the history of mankind.

"At the same time, in part because the banks were also lending Icelanders money to buy stocks and real estate, the value of Icelandic stocks and real estate went through the roof. From 2003 to 2007, while the value of the U.S. stock market was doubling, the value of the Icelandic stock market multiplied nine times. Reykjavik real estate prices tripled. In 2006 the average Icelandic family was three times as wealthy as the average Icelandic family had been in 2003, and virtu­ally all of this new wealth was, in one way or another, tied to the new investment banking industry. " 'Everyone was learn­ing Black-Scholes' (the stock option-pricing model), says Ragnar Arnason, a professor of fishing economics at the University of Iceland, who watched students flee the economics of fish­ing for the economics of money. 'The schools of engineer­ing and math were offering courses on finan- cial engineering. We had hundreds and hundreds of people studying finance.' This in a country the size of Kentucky, but with fewer citizens than greater Peoria, Illinois. Peoria, Illinois, doesn't have global financial institutions, or a university devoting itself to training many hundreds of financiers, or its own currency. And yet the world was taking Iceland seriously. (March 2006 Bloomberg News headline: ICELAND'S BILLIONAIRE TYCOON 'THOR' BRAVES U.S. WITH HEDGE FUND.)

"Global financial ambition turned out to have a downside. When their three brand-new global-size banks collapsed, Iceland's 300,000 citizens found that they bore some kind of responsibility for $100 billion in banking losses - which works out to roughly $330,000 for every Icelandic man, woman, and child. On top of that they had tens of billions of dollars in personal losses from their own bizarre private foreign-currency speculation, and even more from the 85 per­cent collapse in the Icelandic stock market. The exact dollar amount of Iceland's financial hole was essentially unknow­able, as it depended upon the value of the generally stable Icelandic krona, which had also crashed and was removed from the market by the government. But it was a lot."Iceland instantly became the only nation on earth that Americans could point to and say, "Well, at least we didn't do that" In the end, Icelanders amassed debts amounting to 850 percent of their GDP. (The debt-drowned United States has reached just 350 percent.)"